Repsol Said to Seek $2 Bln LNG Plant Amid Ukraine Crisis

The Canaport LNG terminal in Saint John, in the province of New Brunswick, currently turns liquefied natural gas received by tanker back into its gaseous form to meet North American demand for the heating and power-plant fuel. Photographer: Rod Stears/Canaport LNG/AP

May 20 (Bloomberg) -- Repsol SA is considering building a
$2 billion plant on Canada’s Atlantic coast to export natural
gas, as Europe seeks to reduce its dependence on Russia for the
fuel, a person familiar with the matter said.

Spain’s biggest energy company would erect the facility at
its existing Canaport LNG plant, which was designed to import
liquefied natural gas and is underused. Repsol may include the
export project when updating its strategic plan next year,
according to the person, who asked not to be identified
discussing a private matter.

The crisis in Ukraine 4,000 miles away may help Repsol
justify investing more in a disappointing project that has
already undergone a $1.3 billion writedown. The Group of Seven
nations agreed to find new sources of energy to prevent Russia
from using its oil and gas reserves as a “political weapon,”
German Economy and Energy Minister Sigmar Gabriel said May 6.

Russia under President Vladimir Putin provides about one-third of the European Union’s oil and gas needs, mainly via
state-controlled Gazprom OAO and Rosneft OAO through pipelines
that cross Ukraine.

In North America, the explosion of supplies from shale
fields is turning the continent from an importer into an
exporter. That’s prompting companies from Repsol to Dominion
Resources Inc. to consider terminals for supplying Europe, where
the fuel fetches more than in the U.S. Other suppliers want to
ship from the U.S. Pacific or Gulf coasts to Asia.

A spokesman for Repsol in Madrid declined to comment, and
spoke on condition he not be identified.

Power-Plant Fuel

The Canaport LNG terminal in Saint John, in the province of
New Brunswick, currently turns liquefied natural gas received by
tanker back into its gaseous form to meet North American demand
for the heating and power-plant fuel. It moves the gas by
pipeline into Canada and the larger U.S. Northeast market.

The facility has been underutilized after the rise in shale
supplies prompting Repsol’s writedown in February 2013. Canaport
was the only major asset that Royal Dutch Shell Plc didn’t buy
when it agreed to acquire Repsol’s worldwide LNG assets for
about $4.4 billion in the same month.

Repsol has yet to make a final decision on proceeding with
the project, which would take about three years to build, the
person said. The company filed a description of the project
that’s not yet public to the Canadian Environmental Assessment
Agency regulator, the person said.

The New Brunswick provincial government already gave
Canaport an environmental approval to export LNG, according to a
department website.

Shale Surprise

Repsol and its partner at Canaport LNG, Irving Oil Ltd.,
started receiving LNG at the facility in 2009, just as other
import plants across the U.S. were being shut down or proposed
as export terminals. Modern drilling technologies that allowed
companies to unlock vast stores of gas in shale across the
continent depressed domestic prices and reduced the need for
imports.

LNG imports to Canaport over the first 11 months of last
year were 67 percent lower than over the same period in 2010,
according to data from Canada’s National Energy Board.

U.S. imports of Canadian gas by pipeline fell 22 percent in
2013 from five years earlier, according to data from the U.S.
Energy Information Administration, as the largest consumer of
Canadian gas meets more of its own demand.

Repsol’s Canaport conversion would be part of a wave of LNG
export proposals being considered across North America. The
project is among 17 potential export projects along Canada’s
coasts that would together process at least 28 billion cubic
feet of gas a day, consultants Bentek Energy LLC estimated last
month, predicting only a small fraction will be built by 2020.

President Barack Obama signaled that permits to export gas
from the U.S. to Europe may be eased should the two economic
blocs reach a free-trade agreement. The U.S. will probably
become a substantial gas exporter toward the end of the decade,
U.S. Energy Secretary Ernest Moniz said in a May 6 interview
with Bloomberg News in Rome.

The province of New Brunswick is promoting shale
exploration, according an investor presentation. Canada’s third-smallest province by population has seen little development of
the resource after producers shifted from exploring for gas in
North America toward production of higher value oil and gas
liquids.